Alberta projects $12.3 billion surplus in budget update as record oil and gas prices continue to support the pounds

Alberta projects $12.3 billion surplus in budget update as record oil and gas prices continue to support the pounds
Alberta projects $12.3 billion surplus in budget update as record oil and gas prices continue to support the pounds

Record oil and gas prices continue to support Alberta’s books, with the province forecasting a $12.3 billion surplus for 2022-23 in its mid-year financial update, released Thursday.

The surplus is nearly $1 billion lower than projected in the province’s previous fiscal update in August, but is still about $11.8 billion higher than projected when the budget was tabled. 2022-2023 in February. This budget was released the same day Russia invaded Ukraine, triggering a global energy crisis and supply fears that sent commodity prices skyrocketing to record highs.

Alberta Premier Danielle Smith took advantage of the province’s recent energy windfall to announce a series of measures earlier this week designed to help ease the burden of rising inflation, including direct payments families and the elderly. The upbeat financial forecast also comes six months ahead of May’s provincial election, which will be Smith’s first campaign since succeeding Jason Kenney as premier and leader of the United Conservative Party in October.

The global energy situation has greatly benefited Alberta’s coffers.

Total revenue for 2022-23 is projected at $76.9 billion, or $14.3 billion more than the original budget. Of this amount, non-renewable resource revenues are expected to reach $28.1 billion, up $12 billion from the previous year and by far the highest in the province’s history. About 70 percent of that comes from bitumen royalties, which are projected to reach $19.4 billion in 2022-23

This substantial increase is due to the rise in the price of oil due to the tight global balance between supply and demand and the war in Ukraine. More and more projects are also moving to “post-pay” status, meaning they will pay royalties under a higher net revenue formula in 2022-23 and beyond.

The North American benchmark for West Texas Intermediate oil has held above US$85 a barrel since mid-October, but continues to be volatile. Still, the province has forecast WTI at US$91.50 for 2022-23, dropping to US$78.50 in 2023-24 and US$73.50 in 2024-25.

Lower prices were driven by slower demand growth due to weak global economy, impact of inflation and rising interest rates, uncertainty related continued conflict in Ukraine, as well as supply growth.

With oil prices expected to decline over the forecast three years, Alberta’s non-renewable resource revenues are projected to decline to $19.2 billion in 2023-24 and then to $16 billion in 2024-25.

Still, the mid-year financial update released Thursday projects Alberta will remain in the black until at least 2025, with surpluses of $5.6 billion and $5.3 billion projected for 2023- 2024 and 2024-2025, respectively.

Finance Minister Travis Toews said Thursday the surplus is good news for Albertans because it allows for a quick response to the affordability crisis many families face.

About half of the $2.5 billion spending increase from the 2022-23 budget – or about $1.3 billion – will be used for the inflation-fighting measures announced by Ms Smith this week .

The Prime Minister’s announcement included $2.4 billion in support measures, including cash payments of $600 to seniors and for each child in a family for households earning less than $180,000 a year , as well as the suspension of the fuel consumption tax for six months and the granting of rebates for electricity and natural gas. Government officials insisted Thursday that the full amount of spending for these programs is covered on the provincial books.

Other significant spending increases come from higher costs of selling higher priced oil and larger volumes, funding for labor agreements and the oil and gas site rehabilitation program.

Mr Toews said that by “investing in savings and reducing debt for future generations”, the UCP government continues to make Alberta “the best place to live, work and raise a family”.

But these savings do not seem guaranteed.

The new government under Ms Smith has suspended a plan announced in August to use the oil and gas windfall to invest nearly $3 billion in the province’s Heritage Savings Trust Fund. – representing the largest investment ever made in a single year, comprising $1.7 billion from surplus and $1.2 billion in investment income from the fund.

The fund was established in 1976 with income from non-renewable resources. The idea of ​​the fund is to use money from Alberta’s non-renewable resources to invest in the savings of current and future generations.

Mr. Kenney’s government has announced a plan to inject billions into the fund. At the time, the government viewed the $2.9 billion investment as a safe bet, although today’s financial update said the plan would “continue to be evaluated as the year progressed,” taking into account factors such as changes in interest rates and inflationary pressures.

But the government is still considering how much – if any – of the surplus will go into the fund. Mr Toews said on Thursday that decision will depend on a new “fiscal framework” the government is drawing up to guide how surpluses are spent – whether they are used to pay down debt, government spending. infrastructure or directed to the heritage fund.

“We are keeping our options open, as we are committed to developing a transparent fiscal framework,” he said, adding that more details will be included in the 2023 budget.

Even with a global recession looming, Thursday’s budget update projected that Alberta was well positioned to weather economic challenges, thanks to solid levels of investment and growth in non-energy business output, which boosted export revenues and corporate profits.

. Alberta forecast surplus billion dollars in update day budget so the prices record oil gas continue support the pounds

. Alberta projects billion surplus budget update record oil gas prices continue support pounds

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